Lottery winner who scooped $10million jackpot lost $1.5million after they died when officials still came for the money
A lottery winner’s estate lost $1.5 million after his death due to a mistake made after winning the $10 million fortune.
Gary F. Owens won the award with a New York Lottery Win For Life Spectacular instant scratch card.
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However, two key decisions Owens made after his victory led to officials demanding a large chunk of the money after his death.
When Owens won the $10 million prize at age 59, he chose to receive the money in quarterly installments for at least 20 years.
Others opt for the lump sum, which is significantly less than the profit but has already been taxed and could save money in the long run.
Instead of being patient and waiting for the installment payments, Owens made the second mistake, using the prize to borrow money to get upfront payments.
Owens died at the age of 72 on November 16, 2021 in Palm Beach, Florida.
At the time of his death, the lottery winner had outstanding tax payments and his estate, represented by John C. Pattern of Patten Fiduciary Services, was targeted by officials.
The trust fills the gap when a family member or large corporation is not preferred as a beneficiary.
This meant that Patten was liable as successor and his liability was limited only to the assets of the estate that were under his control.
According to the Inland Revenue Service (IRS), the tax requirements due to Owens’ loan are obvious.
Section 72(e)(4)(A) of the Internal Revenue Code states: “Where an individual receives (directly or indirectly) as a loan under an annuity contract or assigns or pledges (or agrees to an assignment) any amount in a tax year ). If you pledge or pledge part of the value of the contract, that amount is deemed to be received under the contract and not received as an annuity.
“The preceding sentence shall not apply for purposes of determining the investment in the contract, except that the investment in the contract shall be increased by any amount included in gross income due to the amount calculated pursuant to the preceding sentence treated as received.”
Although Owens only invested $20 in the contract, he failed to file an IRS Form 1040 in 2009.
In 2014, while he filed an IRS Form 1040, he withheld a large portion of his income.
The IRS then reviewed his tax liability for 2009 and 2014, including an assessment of interest, an estimated tax penalty, a late filing penalty and an accuracy penalty.
Following the assessment, the IRS proceeded against Patten under Section 7403(b), which states: “Any person having a lien on, or claiming an interest in, the property in question [an] action [in which there has been a refusal or neglect to pay any tax] are involved in it.”
Following Owens’ death, Patten filed an application for administration of the estate in October 2022.
The IRS filed a lawsuit against the estate on February 22, 2023 alleging unpaid federal income taxes, interest and penalties.
By June 28, Patten settled the claim with the IRS by paying the entire $1.5 million in taxes.